For the last 18 months most lenders have added additional "Quality Control" in the mortgage process between Underwriting and Funding. Many of those same Investors require the tax transcripts pulled prior to the loan being submitted for Underwriting, and they perform additional Automated Appraisal Valuations on each file - again as a Quality Control measure... trying to get rid of Fraud.
In an Announcement earlier this month, Fannie Mae made it clear to Lenders that they need to do more to determine "Undisclosed Liabilities." In particular, Fannie suggests the following:
- Refreshing a credit report just prior to closing may uncover additional debt or credit inquiries.
- New vendor services are becoming available to provide borrower credit report monitoring services between the time of loan application and closing.
- Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional debt resulting in repayment obligations. In some cases, it is possible to obtain a direct verification with the creditor associated with the inquiry.
Okay - for the most part I think the extreme measures we are going to are warranted. They are a pain, time consuming, and add to the overall cost of processing a loan... but I get it.
But can you imagine having to actually verify if credit was issued from every inquiry?
So a week before closing, the borrower shops for a sofa, a refrigerator, a lawn mower... and it will show up on the final credit report pulled the day before closing... and we'll have to WAIT to see if Lowe's actually issued credit to them? OUCH!
We ALL need to be talking to borrower's about this important, and possibly problematic change in the system! For more information on Credit Inquiries click here.